Refers to the activities of a firm that are necessary to its functioning but are not directly part of production, such as accounting. Such activities, despite the name that suggests a location behind the shop or shop floor, are increasingly done at remote locations, including in other countries, as business process outsourcing.

Backhaul problem

An imbalance in transport flows between two locations, which is expected to cause the prices of transport in the two directions to differ.

Refers to a curve that reverses direction, usually if, after moving out away from an origin or axis, it then turns back toward it. The term is used most frequently to describe supply curves for which the quantity supplied declines as price rises above some point, as may happen in a labor supply curve, the supply curve for foreign exchange, or an offer curve.

Backward indexation

The setting of wages based in part on past performance of prices.

Backward integration

Acquisition by a firm of its suppliers.

Backward linkage

The use by one firm or industry of produced inputs from another firm or industry.

With the same purpose as a bail-out, a bail-in writes off a portion of the borrower's debt, forcing its creditors to bear some of the cost. Term coined by The Economist (2010) in a guest article by Paul Calello.

Bail-out

The provision, usually by a government, of funds to a firm or to another government in danger of insolvency so as to prevent them from defaulting on their debt.

The value of a country's merchandise exports minus the value of its merchandise imports.

Balance of payments

1. A list, or accounting, of all of a country's international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; payments out of the country (payments) are entered as negative numbers called debits.
2. A single number summarizing all of a country's international transactions: the balance of payments surplus.

The value of a country's exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets. Term dates back to 1615. [Origin]

1. A government budget surplus that is zero, thus with net tax revenue equaling expenditure.
2. A balanced budget change in policy or behavior is one in which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget.

A London-based organization of maritime industry firms. It handles and settles freight contracts and provides information on the ocean freight market. It dates back to 1823, when merchants and shipowners who gathered in the Virginia and Baltick Coffee House formed a committee to regulate their market.

Banana war

A trade dispute between the EU and the U.S. over EU preferences for bananas from former colonies. On behalf of U.S.-owned companies exporting bananas from South America and the Caribbean, the U.S. complained to the WTO, which ruled in favor of the U.S.

Bancor

The international currency proposed by Keynes for use as the basis for the international monetary system that was being constructed at the end of World War II. Instead, the Bretton Woods System that emerged was based on the U.S. dollar. See also new bancor.

An international organization that acts as a bank for central banks, fostering cooperation among them and with other agencies.

Bank rate

The interest rate charged by a central bank to commercial banks for very short term loans; the discount rate.

Bankruptcy

The legal process that a person or firm goes through if unable to pay their debts. The process seeks an orderly sharing of losses by creditors and a chance to start fresh for the debtor. No such process exists for national governments or countries, exacerbating the problems of debt crisis and financial crisis.

The exchange of goods for goods, without using money. One of several forms of countertrade.

Barter economy

An economic model of international trade in which goods are exchanged for goods without the existence of money. Most theoretical trade models take this form in order to abstract from macroeconomic and monetary considerations.

An instrumental variable commonly used in labor economics, but also in other fields, including international economics. Prototypically, for estimating the effect of employment growth on local wages, it interacts the local industry employment share with the national industry growth rate. Due to Bartik (1991).

Base erosion and profit shifting

As explained by the OECD, this "refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations." Together with the G-20, the OECD developed a "BEPS Package" of instruments to tackle these strategies.

1. The year used as the basis for comparison by a price index such as the CPI. The index for any year is the average of prices for that year compared to the base year; e.g., 110 means that prices are 10% higher than in the base year.
2. The base year is therefore also the year whose prices are used to value something in real terms or after adjusting for inflation.

A further revision of standards for capital adequacy of banks, effectively tripling the size of required capital reserves. Basel III was agreed by the Basel Committee in September 2010, with the new rules to be phased in from January 2013 to January 2019.

Basel Capital Accord

Also known at Basel I, this was an agreement in 1988 by the Basel Committee of central bankers to measure the credit risk of commercial banks and set minimum standards for bank capital in order to reduce the likelihood of international repercussions due to bank failures.

The idea that if costs of entering a market, such as through exports, become sunk costs, then a temporary change in market conditions such as an exchange rate can cause a lasting change in trade patterns. As one explanation for hysteresis in international trade, this was named by Baldwin (1988).

Beef hormone case

A trade dispute that began in 1989 when the EC banned imports of beef from cows that had been injected with growth hormones, arguing that the health effects of these hormones were suspect. The U.S. eventually complained under the WTO in 1996, arguing the absence of scientific evidence of any harm, and in 1997 the WTO panel agreed with the U.S.

Beggar thy neighbor

For a country to use a policy for its own benefit that harms other countries. Examples are optimal tariffs and, in a recession, tariffs and/or devaluation to create employment.

Term used to contrast the economic policies of China with those sometimes promoted in the West as the Washington Consensus. The term was first used by Ramo (2004), but there does not seem to be a consensus as to what it means.

Bell Trade Act

Enacted by the US Congress in 1946, this specified economic conditions for Philippine independence from the US, including the exchange rate, access to resources, and trade barriers. Some of this was revised in the Laurel-Langley Agreement.

Initially called the 1 Belt, 1 Road initiative, this is a massive undertaking by the Chinese government to built infrastructure on land (the belt) and sea (the road) between China, other parts of Asia, Europe, and Africa. It was launched in 2013 by China's President Xi Jinping.

1. A word referring to a grouping of the three countries, Belgium, Netherlands, and Luxembourg. Claimed by The Economist (May 3, 2008) to have been coined in August 1946 by its Belgian correspondent.
2. The economic union of the three Benelux countries, initially a customs union, later an economic union, and now part of the European Union.

Benign neglect

Refers to doing nothing about a problem, in the hope that it will not be serious or will be solved by others. Said to be U.S. policy toward its balance of paymentsdeficit in the late 1960s, based on other countries' need for dollar reserves.

The assumption, sometimes assumed to be made by firms in an oligopoly, that other firms hold their prices constant as they themselves change behavior. Contrasts with Cournot competition. Both are used in models of international oligopoly, but Cournot competition is used more often.

A survey-based ranking of countries introduced by U. S. News "based on how global perceptions define countries in terms of a number of qualitative characteristics, impressions that have the potential to drive trade, travel and investment and directly affect national economies."

A program of the International Labor Organization begun in 2001 to improve working conditions in Cambodian factories producing garments for export. It grew out of a trade agreement between Cambodia and the United States, which promised to permit greater imports from Cambodia in return for improved working conditions.

The difference between the price that a buyer must pay on a market and the price that a seller will receive for the same thing. The difference covers the cost of, and provides profit for, the broker or other intermediary, such as a bank on the foreign exchange market.

Big Mac Index

An index of PPP exchange rates based solely on the prices of the Big Mac sandwich in McDonald's restaurants around the world, published regularly (recently twice a year) by The Economist.

The exchange rate between two countries' currencies, defined as the number of units of either currency needed to purchase one unit of the other.

Bilateral investment treaty

An agreement between two countries on how their countries will deal with foreign direct investment between them. BITs typically give investors in the host country certain rights, so as to encourage investment.

Bilateral quota

An import (or export) quota applied to trade with a single trading partner, specifying the amount of a good that can be imported from (or exported to) that single country only.

Bilateral trade

The trade between two countries; that is, the value or quantity of one country's exports to the other, or the sum of exports and imports between them.

Bilateral trade balance

The value of a country's exports to a single other country, minus the value of its imports from that country. While data on bilateral trade imbalances are often reported, economists discount them as essentially meaningless, due to the potential for triangular trade.

The receipt given by a transportation company to an exporter when the former accepts goods for transport. It includes the contract specifying what transport service will be provided and the limits of liability.

A project at the Massachusetts Institute of Technology to collect prices from online retailers around the world so as to monitor inflation across countries and time.

Bimetallism

The definition of a currency's value in terms of two metals -- usually gold and silver -- at the same time. The issuer of the currency promises to exchange it for either a certain amount of one metal or for a certain (different) amount of the other. Used by most countries (except the UK) through most of the 19th century.

Binding

1. As an adjective, this refers to a restriction that is met exactly, and is therefore having an effect on behavior, in contrast to nonbinding.
2. As a noun, see tariff binding.

An illegal market, in which something is bought and sold outside of official government-sanctioned channels. Black markets tend to arise when government tries to fix a price without itself providing all of the necessary supply or demand. Black markets in foreign exchange almost always exist when there are exchange controls.

A special category of subsidies permitted under the WTOAgriculture Agreement, it includes payments that are linked to production but with provisions to limit production through production quotas or requirements to set aside land from production. See box.

A trade dispute between the US and EU, concerning subsidies that each alleges the other provides to its large aircraft manufacturer.

Bogor Goals

The objectives agreed upon at a 1994 meeting of APEC leaders in Bogor, Indonesia. These included "free and open trade and investment by 2010 for industrialized economies and by 2020 for developing economies."

Bond

A debt instrument, issued by a borrower and promising specified payments to the holder, usually regular interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls, internationally, providing a mechanism for international capital mobility.

Bond market

The market for bonds, in which the prices of the bonds, and therefore the corresponding interest rates, are determined by the interaction of buyers and sellers.

A pattern of performance over time in an economy or an industry that alternates between extremes of rapid growth (booms) and extremes of slow growth or decline (busts), as opposed to sustained steady growth. For an economy, this indicates an extreme form of the business cycle.

A discontinuity that exists in prices or in quantities of trade at the border between countries. If the price of a good is higher on one side of a border than the other, this is a border effect. If a gravity equation includes a significantdummy for trade across a border, that also indicates a border effect.

1. In the context of trade policy, this refers to policies such as tariffs and quotas that enhance profits and employment in a domestic industry, as opposed to other policies such as production subsidies that might have similar effects without restricting trade.
2. Measures to prevent unwanted entry across a nation's border of illegal or harmful goods or people.

Border puzzle

The finding of McCallum (1995) that 1988 trade between provinces of Canada was many times larger than trade between otherwise comparable provinces and US states, even though observable international trade costs were too small to account for this.

Border tax adjustment

Rebate of indirect taxes on exported goods, and levying of them on imported goods. May distort trade when tax rates differ or when adjustment does not match the tax paid.

Borderless world

The concept that national borders no longer matter, perhaps for some specified purpose.

Used with a color, a category of subsidies based on status in WTO: red=forbidden; amber, orange, or yellow=go slow (i.e., reduce the subsidy) and thus actionable; green=permitted; and blue=subsidies tied to production limits. Terminology seems to be used primarily in agriculture, where there is no red box.

To protest by refusing to purchase from someone, or otherwise do business with them. In international trade, a boycott most often takes the form of refusal to import a country's goods. A primary boycott limits trade with the target; a secondary boycott limits trade with those that trade with the target.

A town in New Hampshire at which a July 1944 conference of 44 countries launched the IMF and the World Bank. These, along with the GATT/WTO became known as the Bretton Woods Institutions, and together they comprise the Bretton Woods System.

The exit of the United Kingdom from the European Union. Surprising result of a referendum June 23, 2016, the process for formally initiated March 29, 2017, when the UK invoked Article 50 of the EU treaty, and is intended to end on March 29, 2019. Exit may be hard, soft, or something in between.

A payment made to person, often a government official such as a customs officer, to induce favorable treatment.

BRICs

Acronym for four large low-income countries -- Brazil, Russia, India, and China -- that were growing rapidly in the early years of the 21st century. Term was coined by O'Neill (2001). Sometimes expanded to BRICIs to include Indonesia or BRICS to include South Africa.

The system of measurement used officially in Great Britain from 1824 until 1965, when it adopted the metric system and its extension, the International System of Units. The US Customary System, still in use by the US, is based largely on the Imperial System, but with some differences.

Brixit

Term used in the British press starting in June 2012 for the possible exit of Britain from the European Union. The term was devised as analogous to the term grexit, although grexit refers to exit only from the eurozone, not from the EU. By the time it was voted on, the term had shifted to Brexit.

Broker's fee

The fee for a transaction charged by an intermediary in a market, such as a bank in a foreign-exchange transaction.

A nonprofit, public-policy think tank in Washington, D.C. Brookings fellows research and write on many public policy issues, including international economics. Politically, it is somewhat left-of-center, providing a home for US Democrats when not in government. Contrasts with the American Enterprise Institute.

Brown field investment

FDI that involves the purchase of an existing plant or firm, rather than construction of a new plant. Contrasts with green field investment.

A rise in the price of an asset based not on the current or prospective income that it provides but solely on expectations by market participants that the price will rise in the future. When those expectations cease, the bubble bursts and the price falls rapidly.

Bubble economy

Term for an economy in which the presence of one or more bubbles in its asset markets is a dominant feature of its performance. Japan was said (later) to have been a bubble economy in the late 1980s.

Budget constraint

1. For an individual or household, the condition that income equals expenditure (in a static model), or that income minus expenditure equals the value of increased asset holdings (in a dynamic model).
2. For a country, the condition that the value of exports equals the value of imports or, if capital flows are permitted, that exports minus imports equals the net capital outflow. It is equivalent to income from production equaling expenditure on goods plus net acquisition of foreign assets.
3. The curve, usually a straight line, representing either of these conditions.

Budget deficit

The negative of the budget surplus; thus the excess of expenditure over income.

Budget surplus

Refers in general to an excess of income over expenditure, but usually refers specifically to the government budget, where it is the excess of tax revenue over expenditure (including transfer and interest payments).

A large quantity of a commodity held in storage to be used to stabilize the commodity's price. This is done by buying when the price is low and adding to the buffer stock, selling out of the buffer stock when the price is high, hoping to reduce the size of price fluctuations. See international commodity agreement.

Build it in Britain

A plan announced by the UK's leader of the opposition Labour Party, Jeremy Corbyn, in July 2018, to "to ensure a stronger future for industry with better jobs and opportunities ... in every part of Britain." It emphasizes support for manufacturing.

Issues that were scheduled in the Uruguay Round agreement for continued negotiations within the WTO. In addition to reviewing the implementation of various agreements, these included negotiations for further liberalization in agriculture and services.

An organization of CEOs of major US corporations. It pursues a number of initiatives, including facilitating international trade and investment agreements and enforcing US rights under existing agreements.

Buy American Act

U.S. legislation, from 1933, requiring that government purchases give preference to domestic producers unless imports are at least a specified percentage cheaper. This is an example of a government procurementNTB that was partially given up under the Tokyo Round.

Buy American and Hire American

An executive order by US President Trump April 18, 2017, intended to raise wages and employment for US workers. The substance of the order is not directed at purchases of US goods and services, but at enforcing immigration laws and ensuring that H-1B visas go only to high-skilled, high-paid recipients.

A form of countertrade in which a foreign seller of plant, equipment, or technology is required to purchase part of the resulting production.

Byrd Amendment

A US law enacted in 2000 requiring that revenues from anti-dumping duties and countervailing duties be given to the US domestic producers who had filed the cases. This was subject of a trade dispute in the WTO and ruled to be not compatible with WTO rules. It was repealed by Congress in 2005.